Mortgage broker commitment - special tool for finding your ideal mortgage broker

Mortgage brokers can shop mortgage lenders much more effectively than consumers. Mortgage brokers are in the market every day, where consumers are in the market a few times during their lives. Mortgage brokers receive price information from mortgage lenders daily as a matter of course. They know the features of transactions that affect price. They have relationships with multiple mortgage lenders, and are therefore well positioned to find and shop among the mortgage lenders offering particular features.

The potential savings from expert shopping are particularly large for borrowers with poor credit. This reflects the much greater price differences among mortgage lenders serving this market segment than among mortgage lenders serving “prime” borrowers.

So, how do you find a good, honest mortgage broker who will get you the best loan program at the best price? Just as mortgage brokers shop for wholesale mortgage lenders, you have to put in some effort to shop for as many online mortgage brokers as possible (look for their sources on this site), shortlist them, evaluate them, and then appoint one to work with. Look for their sources on this site.

How do you evaluate a mortgage broker? To help you, we have appended below Jack Guttentag's "mortgage broker commitment" for you to use. Ask your mortgage brokers if they are willing to work according to the framework set out in the "mortgage broker commitment". They are unlikely to say "no", especially if they realize you understand the value that mortgage brokers provide. Expect them to interview you, however, before quoting a price.

By far the most important benefit you receive from dealing with a mortgage broker who follows the "mortgage broker commitment" is confidence that the broker is shopping the market in your behalf rather than in the broker’s behalf.

Mortgage broker commitment - July 26, 2000, Revised July 16, 2004, Revised November 10, 2004

1. The broker will be the customer's representative or agent, and will endeavor to act in the best interests of the customer.

2. The broker will establish a price for services upfront, in writing, based on information provided by the customer.

(a) The price may be a fixed dollar amount, a percent of the loan, an hourly charge for the broker's time, or a combination of these.

(b) The price or prices will cover all the services provided by the broker. This includes loan processing, for which customers always pay a broker or lender

(c) On third party services, such as an appraisal, ordered by the broker but paid for by the customer, the broker will provide the invoice from the third party service provider at the customer's request. Alternatively, the broker may have the payment made directly by the customer to the third party service provider.

3. Any payments the broker receives from third parties involved in the transaction will be credited to the customer, unless such payments are included in the broker's fee.

If the broker's fee is 1 point, for example, and the broker collects 1 point from the lender as a "yield spread premium", then the broker either charges the customer 1 point and credits the customer with the yield spread premium, or charges the customer nothing and retains the yield spread premium.

4. The broker will use his best efforts to determine the loan type, features and lender services that best meet the customer's needs, and to find the best wholesale price for that loan.

5. The wholesale prices from which the broker's selection is made will be disclosed at the customer's request.

6. When directed by a customer who has met lender lock requirements, the broker will lock the terms (rate, points, and other major features) of the loan, and will provide a copy of the written confirmation of the rate lock as soon as it has been received from the lender.

7. If a customer elects to float the rate/points, the broker will provide the customer the best wholesale float price available to that customer on the day the loan is finally locked.

8. The broker will maintain a web site on which its commitment to its customers is prominently displayed, along with any other information the broker wishes to convey.

9. A broker who displays mortgages prices on its web site must indicate whether the prices are retail or wholesale. If they are retail, the markup must be shown. If they are wholesale, the broker must indicate that the prices do not include the broker's fee.